Balancing allowance follows accepted ownership for depreciation on a discarded asset under the Income-tax Act.

Where the Revenue had accepted the assessee's ownership of a discarded property built on a leased terrace for depreciation under section 32(1)(ii) of the Income-tax Act, 1961, it could not deny the consequential balancing allowance under section 32(1)(iii). The Bombay HC treated the allowance as a direct consequence of the same ownership position and the depreciation already granted, and rejected the inconsistent stance that the asset could be regarded as owned for one purpose but not for the other. The assessee was therefore entitled to balancing allowance on the discarded asset.

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Issues: Whether the assessee was entitled to balancing allowance under section 32(1)(iii) of the Income-tax Act, 1961, in respect of the discarded property constructed on a leased terrace.

Analysis: The property had been treated by the Revenue itself as owned by the assessee for the purpose of depreciation under section 32(1)(ii) of the Income-tax Act, 1961. Once that position was accepted, the claim for balancing allowance under section 32(1)(iii) necessarily followed as a consequential result of the discarded asset and the depreciation already allowed. The contrary stand that the same property could be treated as owned for one clause and not for the other was found unsustainable.

Conclusion: The assessee was held entitled to balancing allowance under section 32(1)(iii) of the Income-tax Act, 1961.

Ratio Decidendi: Where the Revenue has accepted ownership of an asset for depreciation under section 32(1)(ii) of the Income-tax Act, 1961, it cannot deny the consequential balancing allowance under section 32(1)(iii) in respect of the same discarded asset.

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